Review of Glaeser's Triumph of the City

Review of Triumph of the City

As the title suggest, Glaeser’s Triumph of the City is a celebration of our planet’s great urban areas, and Glaeser makes no apologies for suggesting that despite the notions that cities are filthy, congested, crime-ridden, and environmentally threatening, they happen to be some of the happiest, healthiest, greenest and most civilized places on earth.

Glaeser bases much of his argument for urban success on premises that are rooted in fundamental social and economic theory mixed with a little common sense. In discussing some of the failures toward preventing the decline of cities, Glaeser reminds us that cities must invest in people rather than buildings, and that it is the ideas of entrepreneurial individuals and small organizations working in creative interplay and in close proximity, not infrastructure, that helps cities grow. “Human capital trumps infrastructure,” according to Glaeser. The author also explains how well-meaning public policy can unintentionally bring about a city’s decline when policy makers fail to properly incentivize small business, or fail to invest enough in educational institutions, basic public infrastructure or efficient public transportation systems.

Glaeser offers a thought provoking perspective on the benefits of urban poverty (as opposed to rural poverty) by explaining the sorting effects that occur in urban environments, whereby people have a greater likelihood of moving out of poverty and into a working middle class. The author explains the advantages of agglomeration economies in dense urban environments where innovations and ideas cluster to create more productivity, economies of specialization and trade, and greater wealth. The author describes how living in dense urban environments, as opposed to lower density suburban environments, reduces our carbon footprint and increases quality of life. Sunbelt cities are compared and contrasted with Rustbelt cities, and coastal cities, to demonstrate the industrial advantages and household amenities that each has to offer. The author challenges environmentalist policies and makes a bold assertion that cities with strict environmental regulations and restrictions on development are essentially exporting affordable housing to inefficient suburban environments. Glaeser challenges our conventional notions of congestion and density, and challenges other urbanist theories that rationalize limits on housing and other development.

In concluding chapters, Glaeser discusses a recipe for city success (and comparative advantage) that includes nation-specific goals of developing and maintaining 1) highly education populations and workforces; 2) government support of innovative industry; 3) dense agglomerations of innovative business activity and competent public sectors; 4) generous investments in efficient infrastructure; and 5) a commitment to “home-grown human capital” through sensible policies and reliable legal institutions.

The Not So Simple Three Simple Rules

In Chapter 6: “What’s So Great About Skyscrapers,” Glaeser makes a few bold assertions that government regulation of development, including building height restrictions, floor-area ratios and landmark preservation, has resulted in a net cost to society by forcing prices of housing and real estate to unsustainable levels, segregating social classes of citizens, preventing agglomeration of industry, increasing traffic congestion and essentially stymieing urban progress. Glaeser proposes three (3) “simple” rules which I argue may not be as simple as he makes them out to be.

1. Simple System of Fees. The proposal of a system of simple fees to replace “lengthy and uncertain” permitting processes sounds reasonable on its face, but charging builders impact fees to cover the social costs to neighbors who lose a view, lose sunlight or lose some other value related to what are relatively aesthetic qualities are no less difficult to quantify than other sorts of impacts and may even turn out to be much more difficult to apply equitably across various land uses, various real estate asset owners and various real estate space users, residents and workers alike. Imagine the difficulty in appraising the social costs of the loss of sunlight, for example, on a multi-story, mixed-use building.

While these may seem reasonable rules in theory, implementation of such rules would certainly not be as easy as conceiving of them. Glaeser admits that such a system may not be easy to design, but in the same breath he suggests that such a system, once designed, can somehow be “universally applied.” Imagine how difficult it would be to universally apply an impact fee imposed on a builder that covers the social cost of diminished sunlight or diminished water views to a select group of neighboring owners/users/residents. How would the group be defined? How would investors or owners of such real estate be able to appraise with certainty the value of their asset when its value is contingent to some extent not on the relative certainty of a municipal ordinance defining a height restriction but on whether a builder is willing to incur the cost of a permit fee to build at any height? Imagine the legal challenges to the validity and application of such a system, with its narrowly defined tax beneficiaries and its subjectively defined sources of impact. Such a system, no matter how well intended, transparent and targeted, may tend to create the kinds of social and legal hurdles that have historically coincided with other similar forms of rigid and narrowly applied land use regulations.

2. Historic Preservation Limited and Well Defined. Glaeser is not proposing anything here that isn’t already a major consideration by the regulating agents. Common law in the United States has long held that the authority to regulate land use at the local level—an authority granted by the constitution, known as the police powers—enables elected officials at the local level the opportunity and freedom to experiment with legislation that serves a greater public good. Glaeser’s argument is that such legislation ought to consider the economic costs of preserving too many buildings that may not be deserving of such status and protection and thus are preventing a city, its residents and presumably the owners and users of fixed real estate assets, from realizing the fullest economic benefits. Glaeser’s “own preferences” however must only be considered as part of the aggregate of preferences that ultimately elect the governing bodies that decide how land uses are to be regulated. Part of the economic benefits that Glaeser leaves out of his equation is the benefit that is derived from taking a more cautioned approach to the destruction of a city’s legacy, culture and history—and the economic and social value that a society believes can be derived in part through the preservation of certain historical and landmark real estate assets.

Glaeser argues the scope of any regulatory agency will naturally “try to constantly increase” because of bureaucratic empire building or responses to community pressures. While it’s no surprise that governments can become unnecessarily too large, and “well-connected” neighbors can lobby their own preferences, it does not follow that Central Park—one of New York City’s most beloved amenities—would  have somehow been similarly protected from development if the preservation line had been drawn closer to the less restrictive ends of landmark preservation regulation; further, while the costs of restricting development may make protected areas more expensive and more exclusive, the costs of not restricting development may actually create areas that are less economically viable and less socially beneficial. Glaeser’s focus on affordability loses sight of the fact that what’s not affordable is not necessarily socially or even economically beneficial. While the “forest of cranes” helps to keep Chicago affordable (as does the climate), the complete absence of cranes in Central Park helps to preserve one of the greatest urban amenities in the history of urban development—which in turn has influenced the development of valuable open, green spaces in many other modern cities around the world.

So, to use Glaeser’s own urban economics thinking, we must now compare the economic cost of pricey housing to the social benefits of nature, urban tranquility and social connectivity. Certainly, no one will disagree that exclusivity and diseconomies of scale are undesirable urban qualities; but in capitalist urbanized economies, the argument against the formation of exclusive urban enclaves and politically influential communities is one of degree; whatever inequities exist at the micro level must also exist at the macro level. The formation of cities like Hong Kong and Vancouver, cities that Glaeser would say have “embraced verticality and change,” do so with the luxury of having been largely developed in a modern urban era with all the advantages of having learned from cities like Paris, London and New York, cities that have had a greater challenge of adapting history to the needs of a modern society. 

3. Clearly Delineated Power of Individual Neighborhoods. Rule #3 clearly contradicts a couple of Glaeser’s chief concerns: 1) that good environmentalism requires global action not the “narrow outlook of a single neighborhood trying to keep out builders”; and 2) that power in the hands of a few creates exclusivity which then leads to negative externalities and diseconomies in the pricing and regulation of urban development. This is not to say that individual neighborhoods should not have some “clearly delineated power to protect their special character” to some degree, but again, this is a matter of degree. One must wonder if Glaeser is playing on both sides of the fence; or more substantively, whether Rule #3 really proposes anything novel at all. Contradictions aside, would it really make more sense, as Glaeser puts it, to allow individual neighborhoods to “craft their own limited set of rules”? Glaeser proposes that neighborhoods ought to be able to legislate its own land use regulations according to a majority voting share of its residents. If that were the rule, wouldn’t the myopic views of single neighborhoods potentially conflict with the needs of a larger society? Should the Village of Belle Terre, a single neighborhood in Long Island, have adopted an ordinance that restricted occupancy of a housing unit to some narrowly defined concept of “family” so that it excluded and discriminated against a group of college students who had made an economical decision to maximize their living arrangements, and reduce their cost of housing, while attending nearby Stony Brook University? NIMBYISM presents itself in different shades.

Is Glaeser suggesting that activism that restricts the development of housing is somehow less economically beneficial than activism that discriminates against more affordable, alternative housing arrangements? Sure there are social costs to a community whose “ordinary citizens” are impacted by some adverse condition; but does that mean the citizens, rather than the elected officials and agents (urban planners, for example) of the citizens, are somehow more qualified to set up the rules? The problem with Glaeser’s argument here is that deregulation by government doesn’t necessarily liberate communities (or society) from the powerful private interests, cronyism and other forms of “regulation” that impose other type of economic inefficiencies and social costs. Glaeser says the “failure of places like New York and San Francisco has pushed Americans elsewhere.” Well, if that’s true, then thank goodness for failure! Perhaps those Americans have wisely chosen to move to one of Americas’ other great cities, like Boulder, Portland, Asheville, or Austin. There are much worse places I suppose; certainly not everyone is choosing to sprawl out in Orlando, Las Vegas. Okay, maybe Houston.

Environmentalism in San Francisco Begets Sprawl in Houston?!

I must take issue with some of argument presented in Glaeser’s “Unintended Consequences of Environmentalism” section, in Chapter 8. Glaeser would have us believe that California’s growth limitations are imposing a considerable social cost on the rest of the nation and that the “enemies of development” in California use the scarce water supply defense in support of their opposition to development of the California coastal regions. While Glaeser makes a good point about how California can better utilize its water resources, there is certainly, in my opinion, greater forces at play than the general environmental activism that occurs in California. It’s important to keep in perspective that even if we agree that protection of the environment can sometimes impose certain economic and social costs on a society, be it loss of productivity or job growth or increased living costs; there is also an opposing force—that of growth and development—which also imposes certain economic and social costs. To some extent, without these two opposing forces keeping each other in check, there is good reason to believe that a much higher cost is lurking.

Compare the “Eden” like qualities of San Francisco’s coastal areas with the wretched development and industrial pollution that characterizes the Galveston Bay areas surrounding Houston. It is too short-sighted to suggest that California’s environmentalist culture has somehow exported environmental costs to Houston, just as it would be similarly too easy to suggest that America’s capitalist economy is somehow responsible for exporting GDP growth, employment growth and savings to the rest of the emerging world; or that preserved landmarks in Manhattan have somehow exported affordable rents and other household productive amenities to Hoboken. Growth does not occur in a vacuum and the 20-20 hind sight with which Glaeser offers his critique is somewhat dismissive of a multitude of other social, political, historical, and infrastructural conditions by which many urban areas are constrained from implementing Glaeser’s paradigmatic economic model. But, consider the case of Silicon Valley.

Most agree that Silicon Valley offers agglomeration economies for high tech firms and that the benefits of locating in the Valley is unmatched anywhere else in the country; although the burgeoning tech scenes in New York City and Seattle are proof that the Valley is not the only geographical location where technology innovation is netting its greatest productive benefits. According to Glaeser’s supposition, were it not for the California environmentalists, Palo Alto and San Marcos would have, or could have, increased its density of residential and commercial space in order to lure a greater population of residents and workers into the Bay Area, and away from cities like Houston and Phoenix and Las Vegas. While this may be partly true to some extent, Glaser does not mention the very powerful, hyper-localized governments that may be exerting much greater influence on the zoning restrictions than do environmental activists. Likewise, the utter lack of zoning regulations adopted by local governments, in cities like Houston for example, are exerting a much greater influence on the support of sprawling and environmentally damaging development patterns than are the environmentalists whose policies impact Silicon Valley.

An article in the Economist  points to a “quality of growth” that is jeopardized in places like Silicon Valley where restrictions on development adversely affect job quality and the “pace of growth in real output, productivity and wages.” Much of the desire to limit development in Silicon Valley comes from highly localized and politically powerful NIMBYISM attitudes and culture that existed long before Google and Facebook. According to the Economist article, the city of Mountain View’s Environmental Planning Commission has actually supported proposals by Google to develop higher density work and live spaces in the areas. The commission has been seeking to overturn the city council’s rejection of Google’s proposal, and meanwhile Silicon Valley’s high wages and restrictions on such development have created bidding wars for existing real estate resources.

Glaser’s environmentalism-leads-to-greater-environmental-costs argument forgets that Houston owes about as much fiduciary duty to the rest of the nation as does Silicon Valley. The Valley’s choice to limit growth through environmental policy or NIMBYIST attitudes does not mean that Houston (or any other city in the country) is somehow any less liable for the environmental costs imposed on the rest of the nation. The economic focus of the environmental argument may need to be more evenly applied to those urban areas who fail in their own way to be as environmentally conscious as the activists in Silicon Valley.

The Economist article cites a more palpable economic justification for easing the limits on development in the Valley. Because limited development constrains supply and thus raises the prices of real estate, the Valley is essentially exporting potential innovative business investment. These are the “opportunity costs” created by artificial limits on development, and which come in the form of foregone industrial innovations and business opportunities, that obstructs the Valley’s ability to leverage efficient employment multipliers for faster job growth and higher productivity and so on. Of course, the New Economists, like those at the Levy Institute, are becoming increasingly skeptical of this quest for productivity and growth; perhaps the Valley is wise beyond its years if its environmental preservationist policies are also designed to mitigate a relentless pursuit of growth and productivity deemed to be unsustainable in the long run.

Nevertheless, given all the restrictions on growth, the Valley remains unrivaled as a labor market and innovation hub for high tech industries. There is not much evidence that Houston is becoming the new Silicon Sprawl. In fact, exportation of high tech jobs to Texas is deposited in Silicon Hills (Austin), another hotbed for progressive environmental activism and smart growth initiatives. Perhaps Galeser’s argument ought to focus on how environmental activism and local government initiatives can better work in harmony with industry and the demands placed on housing needs in urban as well as suburban areas. As the article suggests, zoning authority at the micro-level may tend to place too much political power in the hands of those whose costs are greatest relative to the benefits of productive new growth. Perhaps those costs can be transferred, or perhaps those small but powerful groups can (or should) be compensated to allow for a more balanced approach. Perhaps zoning liberalization may need to place policy-making at a metro or regional level so that macro impacts and benefits of development are given greater consideration. Of course liberalizing zoning regulation at a regional level must strive to achieve balance with smart growth initiatives at the local level. Some urbanists, like Richard Florida, claim there is an optimum density that boosts innovative activity in places like Silicon Valley; and that vertical development isn’t necessarily compatible with interactions facilitated by more right-sized work and live spaces.

Policy Implications

Two of the more important policy implications discussed in the book pertain to government’s efforts to reduce poverty and protect the environment. In Chapter 3, Glaeser compares Empowerment Zone policies to housing voucher policies and suggests that neither is really effective at solving the larger problems of urban poverty and that policies aimed at place-making in general are not nearly as effective as the more localized, community-based efforts of social entrepreneurs. In reference to the successful Harlem Children Zone’s program, Glaeser asks, “[c]an the federal government successfully replicate the social entrepreneurship that sprang up in New York City?” There is much to consider in whether distant federal policies can be as effective (in concert or not) with local initiatives in solving urban poverty.

The other important policy implication deals with global warming and the energy-intensive lifestyles of Americans, which is partly caused by suburban sprawl in many of America’s largest cities. There are competing initiatives that seek to protect the larger environment on one hand, and those that seek to preserve low density urban space on the other. These policies have the effect of transferring the costs and problems of energy-intensive lifestyles to browner areas in the country that have not yet embraced progressive environmental policies and incentives that work to create more dense urban environments. San Francisco’s progressive environmentalist attitudes and limits on urban growth, for example, are pointed out as being partially responsible for Houston’s suburban sprawl. Glaeser’s suggestion that richer countries ought to develop policies and incentives that essentially subsidize green technology in other less developing countries may face huge political hurdles, since it summons a the larger issue of global social responsibility.

Streetcars and Traffic: Atlanta GA v. Portland OR

An interesting article by Ariel Hart of the AJC draws out some of the debate over whether Atlanta should carry out a plan to develop a streetcar as part of it public transit initiatives. Because I am an ardent proponent of public (and alternative) modes of transportation, and because I used to live in Portland, OR, I felt compelled to write a little note to Ariel:

Portland is a wonderfully vibrant and quirky little city with an amazing culture and a very progressive and intelligent voting population. One of the reasons Portland’s public transit is often seen as the model for othr cities is that Portland’s metro area boundaries are both politically and geographically constrained from sprawling development, at least relative to other major metro areas in the U.S.; and Portland has very disciplined zoning and planning approaches to development. For cities like Portland, it is more feasible to plan a long-term light rail project when the plans for such a project are closely aligned with a long-term growth plan for urban and metro development, and well defined within a tightly regulated boundary, like Portland's Urban Growth Boundary (UGB); this coordination between urban development regulation and urban transit planning is exactly what spurs the sorts of transit-oriented development patterns that ultimately lead to smart growth and help to justify the expenditures of such significant transit projects.

According to Ariel's article, it appears Portland has successfully and appropriately aligned the funds to finance and operate the streetcar project with parking revenue and taxes from property owners along the system's routes. When transit funding is properly aligned with transit behavior and future transit-oriented development, it naturally encourages smarter transit. By contrast, Atlanta is proposing a sales tax to fund much of its public transit development.

In the article, opponents of the Portland streetcar project cite the stalled out development projects in the Pearl District--the city's largest beneficiary of the progressive transit plan--but forget that as condo and mixed-use development stalled in 2008 through 2010 (as it did everywhere else the country), Portland would not have been able to achieve what is now one of the most vibrant models of urban development int he country had it not been for the wide support of the street car project, not to mention the abundant public green space and well-planned waterfront development that was mandated within the district.

One economic justification for (or advantage of) Portland’s streetcar—and one that Atlanta will certainly be challenged with--is the fact that in Portland, a city whose square city blocks are densely populated with vibrant mixed-use development and are right-sized (about 200 X 200 FT), there is a far greater consumer benefit per linear-mile of streetcar usage. This section of Ariel's article provides some insight:

'"I honestly think the streetcar has built a destination," Watson said. "People go by in the streetcar and we'll see them looking out the window at us, pointing. Then they'll get off next stop and walk back."What makes a streetcar different from a heavy rail line or even a bus, is how easy and pleasant it is to ride. In most cases, people get directly on and off at street level, and it moves smoothly down the street at a moderate pace, almost like an amusement ride.'

This again goes back to the smart development patterns and growth plans instituted long ago. The mobility study is interesting but I think partly flawed. Even though Portland ranks lower in having the worst traffic congestion, it is important to know that Portland rarely widens its roadways to the extent that Atlanta does. So when you control for urban growth restrictions and roadway capacity limitations, I would bet that Portland ranks far superior to Atlanta in terms of a more relative comparison.

In my opinion, suburban traffic congestion can be a good thing and will force alternate modes of transportation in the long run. When Portland decides to restrict urban growth and limit the capacity on its highways, congestion naturally occurs at a much higher (faster) rate per same-size road mile. The comparison of 81% commuters in Portland vs. 88% commuters in Atlanta is not an apples-to-apples comparison. The commuters in Portland travel much shorter distances overall, even though traffic can often get just as snarled as it can in Atlanta. One major difference is that in Portland traffic congestion and average commute distance is somewhat directly determined by the UGB and the resistance to increasing roadway capacity; whereas in Atlanta, congestion has been largely produced by massive population growth and sprawling development patterns. Aside from that, Portland is a much smaller metro area.

To me, it’s not remarkable that Portland’s commuter rate is in the 80th percentile and considered high for a city whose bicycle commuter rate ranks among the top in the nation. The city's light rail is still very limited in its reach and scope. What’s remarkable is that despite the political and geographical and economic obstacles to developing public transit, Portland seems to have struck a good balance. Atlanta can learn a lot from it, and I hope it continues to do so.

Saving the Crum & Forster Building

I recently wrote a letter to Atlanta's urban Design Commission, Executive Director, Doug Young, arguing in favor of preserving an historic landmark in midtown Atlanta that is presently being threatened with demolition by the property's new owners. Details of the threat are posted here on the Atlanta Preservation Society's website. The contents of the letter are presented below:

July 17, 2012

Doug Young, Executive Director

Urban Design Commission

City of Atlanta Office of Planning

55 Trinity Avenue, Suite 3350

Atlanta, GA 30303-0331

RE: Preserving Symbols That Matter: The Crum & Forster Building

Dear Doug,

As a resident of the City of Atlanta, and a frequent visitor and patron of Georgia Technology Square, and as an ardent supporter of smart growth and sustainable urban design, I support the preservation of the Crum and Forster Building in its entirety, and I oppose the introduction of legislation that would de-designate any portions of this landmark property.

In reviewing the Application for Certificate of Appropriateness submitted by the Georgia Tech Foundation, Inc. (Applicant), I was surprised to learn that the Economic Review Panel (ERP) appointed to provide evidence of the existence of a condition of unreasonable economic return consists entirely of persons whose professional expertise in real estate appear to have little, if anything, to do with assessing the economic benefits of historic preservation and instead have everything to do with assessing the financial returns and accounting profits associated with urban real estate investment opportunities. It is certainly not surprising that the ERP has reached a unanimous agreement that a “reasonable economic return” cannot be achieved under any methodology that involves renovating the existing structure. The ERP’s analysis of investment returns and accounting profits likely does not include the economic benefits and costs associated with the preservation of history, architecture and culture, nor the benefits and costs associated with the provision of public green space and adherence to urban design principles. Rather, it is more likely the ERP’s calculation consists primarily of the income and appreciation growth requirements needed to satisfy the Applicant’s real estate investment objectives as stated in their own financial reports.

While I strongly support the Applicant’s goals in promoting higher education and enhancing the campus and midtown community through responsible development, I do not support the destruction of a significant architectural landmark on the basis of the Applicant’s financial objectives. I believe the Applicant is fully capable of exploring alternatives that help achieve the Applicant’s financial and non-financial goals while simultaneously striving to preserve and protect an important and architecturally significant historical landmark.

Current Level of Economic Return on the Subject Property

The ERP’s claim that a complete restoration to the subject property would devalue the surrounding parcels acquired for assemblage, and their claim that the costs of renovation to the subject property would be “impossible to recoup,” does not consider all the economic benefits associated with preservation and restoration of the subject property—nor does it consider the significant history, architecture and culture underlying the subject property’s true value. It appears the ERP’s directive in finding evidence of a condition of unreasonable economic return is centered squarely on the Applicant’s financial position, changes to the Applicant’s net assets, and the expectation of cash flows produced by the Applicant’s various investment opportunities—of which real estate comprises only five percent.

A measure of the current level of economic return on the property, as interpreted and stated in the Applicant’s application, provides no true measure, and no true value, of the real net economic benefits to the Applicant or the midtown community. That the Applicant and its affiliates chose to purchase the property (and thus purchase the option to hold for three years, or else develop) at the peak of a real estate cycle, only to suffer a significant loss in value and loss of potential income during the recession, has relatively little weight as a determining factor in whether or not to preserve one of midtown Atlanta’s few historical icons. Further, the Applicant’s option to take zero depreciation reduction because of the Applicant's plans to demolish the subject property was a calculated investment decision. The Applicant exercised a development option that gives the Applicant the right without obligation to defer development of the subject property to a future period with full knowledge of the potential risks associated with such an option, including the risk that is inherent in purchasing an architecturally significant historic building that would potentially be subject to imminent landmark designation if/when threatened by destruction.

The current level of economic return on the subject property would therefore not only include the purchase price, taxes, expenses, interest and debt service, but also the expected rate of return derived from the Applicant’s option valuation and optimal timing of a proposed assemblage, entitlement and redevelopment of the subject property and its adjacent parcels. Because the Applicant took a calculated risk in forgoing the option to derive income and depreciation deductions from the subject property in its current or rehabilitated condition during the past three years, the Applicant cannot necessarily claim that the costs incurred during the past three years represents an unreasonable economic hardship; nor should the commission weigh these costs without giving full consideration to the true value and economic benefit of the Applicant’s development options and the value and economic benefits associated with preserving an important piece of Atlanta’s history and architecture.

Market Value and Feasibility of Alternative Uses for the Subject Property

The contention that it is “not economical to use the existing building” for the purposes intended by the Applicant does not on its face appear to include other economically beneficial alternative uses for the building that also meet the intended business requirements and other development objectives of the Applicant. I hope that the commission will encourage the Applicant to explore alternative uses for the existing building that not only serve the Applicant’s interests but also the interests of a community that is impacted by the continued expansion and development of Georgia Technology Square.

In its application, the Applicant uses a tax assessed value of the subject property of $2.1 million in its current condition to demonstrate that the property is extraordinarily under-valued when compared to the potential investment value of the subject property after it is redeveloped and integrated as part of a larger project. The tax assessed value and the Applicant’s estimated $150 million ex-ante value of the larger project—which includes destruction of most of the subject building—does not provide the commission with an appropriate or accurate  comparison of the estimated “market value” of the subject property in either its current condition or in the Applicant’s planned future condition. It seems prudent that the commission should encourage the Applicant to provide a more detailed and accurate calculation of the subject property’s estimated market value that considers alternative income-producing uses for the subject building. These values can then be evaluated alongside the benefits derived from potential government incentives and then measured against the social and economic costs of destroying one of Atlanta’s few remaining historic landmark buildings.

The Applicant has stated in its application that the reuse of the existing structure is “not feasible for an expansion of Technology Square” and that the existing structure is “incompatible with the balance of Technology Square.” It is quite frankly hard to believe that given the Applicant’s (and its affiliate’s) long and admirable history of successfully preserving and integrating symbols of architectural history throughout its campus through the adaptive reuse and innovative integration of historic buildings into new development contexts, that the Applicant, in this instance, is somehow stymied in its ability to explore and develop a more creative solution for the subject property.

If the Applicant’s intention is to “enhance the viability and scope of Technology Square,” through its expansion of the subject property, then it seems reasonable to expect that the Applicant would take the same approach and consideration to preserving significant historical symbols in Technology Square that are meaningful to the Atlanta community as it would the symbols that are meaningful to Georgia Tech's main campus. We would not expect, for instance, that the Applicant would ever consider destroying the beautiful and historic buildings in Georgia Tech’s Old Campus and Hill District as a means to achieving investment returns.

Proposed Preservation of the Existing Subject Building and Alternative Use of Adjacent Parcels

The Applicant has suggested that preserving the existing subject building would create an imbalance in the expanded development of Technology Square; and the applicant has provided a sketch of their proposed development which presumably describes a more balanced approach, at least from a building mass and design aesthetic. The sketch shows a towering high-rise, which looks to be 30-stories or higher, that flanks West Peachtree Street and which considerably dwarfs the adjacent College of Management building and also nearly conceals the beautifully designed southeast corner of the College of Management building. Further, the sketch does not show any publicly accessible plaza or green space other than the miniscule landscaping that fronts the subject property of the proposed development along the east side of Spring Street. It does not appear that the Applicant’s proposed development, as illustrated in the sketch, meets some of the basic tenets of contemporary urban design principles that provide for appropriate building height/mass/scale or some allocation of public green space. If the Applicant goal is to provide a balanced project, it seems prudent that the Applicant ought to be encouraged to explore alternatives that provide balance in other important areas, such as the balance achieved through the provision of inviting public spaces and/or the preservation of significant historic symbols.

If the Applicant wishes to create balance and harmony with respect to their proposed project, then perhaps the Applicant will explore the idea of forming a public-private partnership with the City of Atlanta to provide the community and Georgia Tech’s own employees and students with a lively urban oasis located at the southwest corner of the block at Spring and 4^th Streets. The midtown Atlanta community is in dire need of an urban renewal plan that responds effectively to the transformation of vacant lots into green and open spaces that serve an important community need and work to mitigate some of the density that is proposed by the Applicant’s project and other future development. A public plaza (or campus green space) like the one shown below can provide the midtown community and Georgia Technology Square with an attractive and popular destination for residents, workers, students and tourists, and will serve to boast the economic vitality of the not only the Applicant’s expanded development but also the entire midtown community at large.

Preserving historic and iconic elements is not always economically feasible, or even practical, from a property owner’s perspective. However, if the element in question is socially, historically and culturally significant to the neighborhood or community at large, then efforts must be made to preserve the element in its entirety by encouraging the applicant to work collaboratively with urban design experts, other stake holders, and a supportive community to develop an innovative solution.

< image 1 >
photo of Jameson Square, Portland Oregon

What’s striking about the presently built Technology Square development, the proposed design of building masses provided by the applicant, and many other blocks in the midtown area, is the utter lack of public spaces that invite pedestrians to gather and connect with each other in a well-designed and welcoming public green space that is accessible and available to everyone in the community. Aside from the relatively small public plaza at the corner of West Peachtree and Fifth Streets, and the two semi-private courtyard plazas concealed within the building mass of the Georgia Tech Hotel and Conference Center and the College of Management, there is not one other inviting and accessible, public green space provided in Georgia Technology Square for the workers, students, tourists and residents of Atlanta to enjoy.

The Crum Forster building and the adjacent lot to the south of it provides a wonderful opportunity to engineer a transition between public and private space, and large and small building mass, by creating an inviting public-to-private threshold designed to serve the community and celebrate a significant piece of Atlanta’s architectural history. If the Applicant and its affiliates prefer to build the tower along West Peachtree, then the southwest corner of the project (corner of Spring and 4^th Streets) provides an opportunity for the City of Atlanta and the Applicant to work together to create a much needed public space, like the green and shaded urban plazas that are the staples of other great cities; an urban space where students, workers, residents and tourists alike can relax, gather and connect. Such a space would contribute immensely to the social and economic vitality of both the Georgia Technology Square development and the midtown community at large.

Furthermore, the planned office tower along West Peachtree, if approved, ought not destroy the wonderful visual elements located at the southeast corner of the adjacent College of Management building. The office tower can have a four or five story base that is consistent with the mass of adjacent buildings in the Technology Square area, and still provide a multi-story tower that is set back a reasonable distance from the low-rise buildings that surround it. Locating an urban green space at the southwest corner of the project provides an excellent opportunity to enhance the beauty of the entire Crum Forster building when viewed from any location within and around such a space. The image below provides one alternative to the sketch submitted by the Applicant, and demonstrates how such a configuration solves multiple issues of “balance” with respect to urban design, building mass and public green space provision.

< image 2 >
image of proposed design for retaining existing building and creating an urban plaza

The Crum and Forster Building is of Exceptional Importance to the City

Finally, the Crum and Forster Building is a designated Landmark. A Landmark building is defined as a building "of exceptional importance to the city, state or nation and whose demolition would represent an irreparable loss to the city." This designation indicates that the Crum and Forster Building met the criteria for architectural significance set forth in the Preservation Ordinance (Sec 16-20.004).

In its current state the Building has an exceptionally high degree of integrity and validity with all of its character-defining elements intact. Chapter 20 of the Ordinance calls not only for the protection of such buildings but also for the promotion of sound design principles in areas of new development and redevelopment. The destruction of a Landmark building runs counter to the requirements of the Ordinance and is unacceptable from a preservation standpoint and wholly unnecessary from a design standpoint. The de-designation and demolition of this property should not occur and should not provide a roadmap for circumventing the City's Preservation Ordinance nor the City’s own urban design standards.

Sincerely,

Bret Hewett


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Taxing Atlanta's Sprawl

Not sure if you had a chance to read the Sierra Club’s position statement, but it presents some valid arguments as to why the bulk of funding to expand roadway capacity does more to exacerbate sprawling growth than it does to sufficiently provide for much needed expansion of public transit, commuter rail, bikeways, and other such systems within the city’s perimeter. I especially agree with the statement’s view that a sales tax has little influence on travel behavior. There is good reason to believe that tying transportation revenue to travel behavior (in other words, taxing the behaviors we seek to avoid) through parking taxes/fees, roadway tolls, or gasoline taxes, rather than through a sales tax, will likely encourage smarter transit-oriented development patterns. But alas, Atlanta faces many, many other challenges to containing sprawl.

Pro-Investment, Rent-Seeking Crony Capitalism

A recent New York Times Magazine article by Adam Davidson, co-founder of NPR's "Planet Money," discusses the issue of income disparity, job growth and investment incentives with Edward Conrad, a Bain Capital executive and friend and colleague of Mitt Romney. Conrad's pro-investment view of the economy provides little sympathy for the recent financial collapse and offers no support whatsoever of any government attempt to promote income equality. In Conrad's view, the 99% ought to be thankful for the increasing wealth of the 1% on the theory that if payoff (incentives) for risk-taking investment is large enough, then people will take more risks, industry will become more efficient, and every dollar earned by a risk-seeking investor will produce $20 in value for the rest of the general, and presumably risk-averse, public.

When asked about the influences of power and politics on economic growth, a.k.a., crony capitalism, and the rent-seeking behavior of firms that often defies free market mechanisms, Conrad dismisses the notion as phenomena common to third-world countries, not the United States. Of course many economists point out that gains from risk-seeking behavior can often be large and concentrated in the hands of the few even if the the costs, which are also large, are spread out among many. This especially true when powerful incentives, such as monopoly profits, encourage wealthy and powerful firms to lobby government for such things as tax rebates, deregulation (or regulation against competitors), and special franchise rights to control a market.

Too often, the result of rent-seeking behavior is that the benefits of risky investment fail to outweigh the investment's costs, including the costs of negative externalities and dead-weight losses to society. Rewarding wealth to those in power, and those who  have greater resources to influence policy, comes at a greater cost to society when those who can offer more innovative ideas, products and services, are prevented from entering the market. When large gains (monopoly profits) can be attained through exclusive agreements, patent protection, protectionist policies, legislative action, deregulation, and so on, powerful and wealthy firms will spend large sums of money in order to enhance their odds of being chosen as the beneficiaries of those gains. Because the advantage to any particular beneficiary is an increasing function of the amount of money it spends lobbying for those gains, an unfortunate consequence of rent-seeking behavior is that entitlement and privilege is often granted to firms even when the benefits do not exceed the costs (economic and social) of the entitled firm's investment opportunity.

Consider how lobbying behavior in the U.S. auto industry has historically led to inefficient markets, stifled innovation and wasteful spending when the Big Three firms were able to "purchase" the privilege and entitlements to engage in monopolistic behavior. Because these firms faced intense competition from overseas competitors and rising gas prices in the 70's and 80's, the firms sought to influence government to impose import restrictions and other trade barriers on the foreign competitors, thus enabling U.S. automakers to earn substantially more expected profits than they would without such barriers, particularly in an environment where gas prices and demand for more fuel efficient automobiles would have forced the U.S. firms to invest in substantial technology. The lure of expected savings via government regulation encourages firms to engage in lobbying behavior and spend an amount of money that is no greater than the expected profits that can be attained from the firm's project or investment; and in Conrad's pro-investment view of the world, incentives to invest are only attractive if the rewards are large enough.

Yet, a firm's investment does not always lead to innovation and long-term sustainability, even if it does lead to short-term price reductions. The U.S. auto industry is a prime example of how concentrated wealth in an oligopoly--achieved through aggressive lobbying and government regulation--can actually stifle innovation and result in long term damage to the economy and the environment. In Conrad's view, it is perfectly rational for U.S. firms to incur exorbitant expenses in its lobbying efforts, so long as those costs do not exceed the firm's expected economic profits.

What Conrad fails to consider however is the social cost of such firm behavior. An efficient economy is one where firms consider the triple bottom line and one where government takes every feasible step to discourage rent-seeking by entitling private industry participants on the basis of social and environmental well-being rather than on the amount of money spent on lobbying.

Generation Y Bother

In a recent New York Times Op-Ed, co-authored by Todd Buchholz, an economist, Harvard instructor, former White House director of economic policy, best-selling author of Rush: Why You Need and Love the Rat Race, and one of Successful Meetings magazine's "Top 21 Speakers of the 21st Century," the authors misrepresent the motives, aspirations and work ethic of the present generation of young adults facing the new economy, and in doing so, egregiously misinterpret some of the most important and persistent themes and characters in classic American literature.

In their article, the Buchholzs claim that young Americans today are "risk-averse and sedentary" and have somehow inherited a "stuck-at-home mentality," as evidenced by a 40% decline in interstate mobility among 20-somethings since 1980. The Buchholzs support this view by referencing a recent study by the Pew Research Center which shows the proportion of young adults living at home nearly doubling between 1980 and 2008; and in order to emphasize their point, the Buchholzs juxtapose what they consider to be the typical young adult’s situation today with that of Tom Joad, the iconic, Depression Era protagonist in Steinbeck's great novel, The Grapes of Wrath. They propose that the young adults of today's generation, whom they dub, "Generation Why Bother," should learn to recognize the courage of Tom Joad, yank out their power cords, and do whatever it takes to get back out on the road. Unfortunately, the Buchholzs’ portrayal of Tom Joad "load(ing) up his jalopy with pork snacks and relatives" –as if to a Beverly Hillbillies soundtrack--and "flee(ing) the Oklahoma dust bowl for sun-kissed California," is a rather foolhardy depiction that utterly contradicts and discredits Steinbeck’s message. Did the Buchholzs even read the book?

Steinbeck's main character is by no means a determined capitalist or a savvy entrepreneur, or ambitious career-seeker. He is an egocentric, ex-con, turned humanist. Having just been released from prison amid the great Oklahoma dust storms of the thirties, Tom Joad is introduced to readers as a pathetic man of self-interest who developed a carpe-diem attitude in prison as a means of coping with the disillusionment and bleak prospects faced by those struggling to make a living during the Great Depression. The Joad's journey West, via Route 66, is by no means a risk-seeking capitalist adventure for restless movers-and-shakers who prefer transient, entrepreneurial lifestyles; and the Buchholzs’ suggestion that "sun-kissed California" held any real promise of fortune for migrating farm workers is a sorely misunderstood reference to the novel that falsely presents Steinbeck's California as some archetypal or mythological Land of Opportunity.

A closer look at the Pew Research study, from which the Buchholzs base their critique, reveals that employment status, among other variables, plays a significant role in the formation of multi-generational households. According to the study’s findings, nearly half of today’s unemployed adults, aged 18 to 34, are living with their parents because of economic conditions. While the study does not identify any clear socio-economic pattern or ethnic bias, it does find other contributing factors such as delayed marriage, immigration, and the economics of multi-generational living arrangements, the sorts of variables which the Buchholzs conveniently exclude from their analysis entirely.

The study surveyed young adults aged 25 to 34, a large segment of the demographic commonly referred to as Generation Y, or Gen Y, for short. Today, Gen Y comprises the largest segment of the population, representing those Americans born between 1979 and 1996 (ages 16 to 33, in 2012), and making up approximately 80 million people. That's about 5 million more people than those in the Baby Boomer generation, America's second largest population segment. The year was 1962 when the Baby Boomers ranged in age from 16 to 33, and it's clear from the Pew Research study's chart (left), that this group's declining trend in multi-generational household arrangements in the fifties and sixties stands in stark contrast to the trend set by succeeding generations since 1980. The shift is indeed striking, but hardly provides evidence that Gen Y, or the Breakfast Club generation preceding it, is somehow less adventurous and less industrious than their Baby Boomer counterparts were more than thirty years ago. Are we really to believe, as the Buchholzs suggest, that Gen Y is "literally going nowhere"?

What the Buchholzs also fail to acknowledge in their stinging critique of Gen Y are the multitude of historical, cultural and societal changes that have shaped our current socio-economic environment and have greatly influenced American multi-generational household arrangements. One important contributing factor is the rate of poverty in our country. In post World War II America, the U.S. poverty rate was in a constant decline every year before bottoming out in 1973, at just under 9%, then steadying (on average) between 1974 and 1980--a period marked by an oil crisis, an energy crisis, and the beginnings of a global economic recession. Shortly after 1980, however, the U.S. began to experience high rates of inflation, and the Fed's contractionary monetary policy eventually brought about a severe economic recession in the U.S. The recession peaked just before the start of 1983, when nationwide unemployment rates were 10.8%, the highest levels since our country's (and Tom Joad's) Great Depression.

What's even more striking is the strong correlation between the percentage of those living in multi-generational households and the U.S. poverty rate between 1961 and 2009. In somewhat crude fashion, I superimposed a rough approximation of the poverty rate (taken from U.S. Census data) onto the Pew Research Center's chart to illustrate the relationship. The two lines follow a strikingly similar pattern, with the movements in multi-generational households lagging slightly behind poverty rates.

Although their Op-Ed piece is brief, the Buchholzs never mention the evolving cultural and economic climates, or the shifts in consumer behavior, or the evolution of a greater environmental and social consciousness among young generations during the past half century. Gen Y is a generation of information processors, social net-workers, and telecommuters who, in my opinion, are highly innovative and highly productive in their own right; and who are not inclined to follow beaten paths, take on traditional careers, or place much emphasis on material possessions as those in the generations that preceded them. The Happy Days of the fifties-sixties, the sexual/cultural revolution of the seventies, and the mass consumerism that defined the eighties-nineties, has given way to a new generation that prefers to be more socially conscious, more environmentally conscious, and more health conscious; a generation that prefers to be connected (wirelessly or otherwise), not just to friends and family, but to the local communities where they live and the global communities in which they dream of living; a generation that prefers to wage voice rather than war, and prefers social change over expensive, gas-guzzling cars, and would prefer to create a cool Internet business rather than toil away at the production line of some auto factory.

Tom Joad doesn’t leave for California because he longs to be on the road; nor is he driven by any entrepreneurial hunger or capitalist spirit. His journey begins as a means of survival against the hardship and hostility and economic injustices facing his family and countless others who lost their farms to wealthy bankers and are coerced by wealthy California landowners to migrate West, risking life and limb, for jobs that do not exist. As Steinbeck’s story progresses, Tom Joad transforms from a man of pure self-interest to one who eventually sets out on a course of public action against the world’s injustices. Tom Joad is by no means the Jed Clampett character whom the Buchholzs romanticize about. Steinbeck’s Tom Joad represents the migrant's suffering, not the migrant's entrepreneurial success. Steinbeck's California, far from being "sun-kissed," is a state that represents a broken promise to the migrants. It symbolizes the exploitation of land for the means of mass production and support of an industrial system where workers like Tom Joad are treated like animals, denied livable wages and forced to kill to survive.

According to the Buchholzs, young Americans today are less inclined to buy a car or get out on the road, and are more inclined to spending too much time on the Internet checking Facebook. Yet the migrant lifestyle led by Tom Joad and his family is hardly the life we'd wish our children to consider. It is a harsh and cruel way of life that lacks family unity and home identity. What the Joads rely on most for strength and support is not the individual courage the Buchholzs are trumpeting, but rather a social connectivity to, and unity with, other families and individuals who share in the same plight and who are committed to one another's survival. Imagine what the Joads would have accomplished through the Internet.

For Steinbeck, the evils that plagued the Joad family and California's migrant workers were self-interest and an unsustainable capitalist system designed to reward a few at the expense of sinking thousands into poverty.  This was the Occupy movement Steinbeck was most concerned about, and it is not the one the Buchholzs describe in their article. Steinbeck wrote about his novel’s purpose: "I want to put a tag of shame on the greedy bastards who are responsible for this (Great Depression and its effects)."

Why are the Buchholzs so nostalgic for an era where a kid "longed for his driver's license and a chance to hit the road and find freedom" when we now have an era where a kid longs for his computer, an Internet connection and a chance to advance freedom by connecting and communicating with the world? I'm not suggesting that our young adults ought to spend more time on computers and less time getting out and exploring the natural world. I happen to have a son who belongs to Generation Y; and he's every bit the mover-and-shaker the Buchholz claim that young adults were prior to 1980. In any case, I'd rather my son stay out of his car, and have dinner more often with his family, and if he ever has a chance to, connect with someone from across the globe to do the very thing Tom Joad does: become a tireless advocate for the oppressed.

Do Food Stamp Restrictions Really Work?

A recent article in the L.A. Times describes how Ronda Storms, a Republican state senator in Florida was so galled at the sight of grocery shopper using federal food stamp money to purchase junk food that she sponsored a bill in the state of Florida that would prohibit people from using funds provided by the Supplemental Nutrition Assistance Program (SNAP) to purchase “non-staple, unhealthy food.” Proposed legislation seeking to restrict SNAP purchases may be driven by politician’s concerns (genuine or not) about public health, but such legislation can be subject to the resistance of a rather odd coalition of anti-hunger advocates and powerful business lobbyists. If you think the Coca-Cola and its upstream raw material producers don’t profit from SNAP revenues, think again.

Aside from avoiding further stigmatization of the poor, there may be good economic reasons for rejecting such proposals. Can earmarked funds really prevent a SNAP recipient from purchasing junk food? If a person with a monthly income of say $400 receives $100 in food stamps, and the person’s monthly food budget under the SNAP program is $200 ($100 purchased with her own cash, and $100 purchased with food stamps), and the person typically spends say a quarter of her budget ($50 of the $200) on “junk food,” then obviously the person will still be able to purchase $50 worth of junk food—at no additional cost—even if the earmarked food stamps are restricted to healthy food items. Under the restriction she simply uses $50 of her own cash to buy the junk food, whereas before she could have used the SNAP money to buy the junk food. In either case, the total food purchased is $200, with $50 of that amount spent on junk food.

So what happens to the consumer who has the same $200 budget, but who typically spends $150 on junk food? Will she be forced to buy $50 worth of healthy foods that she would not have otherwise purchased? Or will she let some of the SNAP benefits go unused? Many would argue that either outcome would be more beneficial. However, such a condition may be the exception rather than the rule; and before we introduce a policy that restricts all recipients' food consumption, we ought to do a little research. Besides, if politicians like Ronda Storms want to implement policy that substantially improves public health for all citizens, it might be more efficient (a better use of taxpayers’ dollars) and more effective to target the producers of unhealthy foods rather than the consumers. Check out my post on Denmark's fat tax.

There is also strong evidence to support that idea that a cash grant program is superior to a restrictive food stamp program. The idea here is that if recipients would have spent at least as much of their own money on food purchases as they received in stamps then not being able to use stamps to buy other goods is a somewhat meaningless restriction; and if recipients spend less on food than they receive in food stamps, then of course the food stamp program has the effect of forcing the consumer to devote more to food than she would have chosen to spend on her own.

The USDA Food and Nutrition Service issued a report in 2007 that suggests there is no known research-based evidence to support restricting food stamps and therefore no basis for singling out low-income recipients. The USDA’s own estimates indicate that approximately 70 percent of all food stamp recipients—those who receive less than the maximum benefits allowed—are expected to purchase some portion of their food with their own money.

Fat Tax Burden

The truth is the Danes are some of the leanest folks on the planet, with less than a 10% rate of obesity, about a third of the United States’ obesity rate. The other truth is the new “fat tax” in Denmark has been quite successful in achieving the goal of limiting Danish citizens’ intake of unhealthy foods. That government would dare regulate food intake is what Fox News commentators will decry as social engineering. Denmark prefers the term, social responsibility.

Among the chief complaints registered by anti-taxivists is that a tax on food products, such as Denmark’s fat tax, creates dead-weight welfare losses and shifts the tax burden unduly onto the consumer.  Welfare (in economic terms) aside for the moment, we have to examine more closely the demand and supply elasticities of unhealthy food products to check if anti-tax rhetoric is fully supported by fundamental economics. To clarify, the Danish fat tax is an ad-valorem (“according to value”) tax, a percentage tax. Instead of shifting the supply curve directly upward, as a per unit excise tax does, the ad-valorem sales tax effectively rotates the producer’s supply curve counterclockwise from its axis point, such that the spread between the pre-tax and after-tax supply curves is proportional to the percentage tax rate at every output level. It turns out that demand elasticity for a sweet, fatty danish—we're talking food here—is rather elastic, meaning that demand for danishes and other fatty treats, unlike the demand for say gasoline, tends to be very responsive to changes in price.

Notice from the two graphs drawn in the figure below, that when demand for a product is more responsive to a change in price, the share of the tax burden on the buyer is reduced. This makes intuitive sense; another way of describing it is that the tax burden falls most heavily on the side of the market that can least escape it. If the buyers have greater alternative substitutes, and suppliers do not, then most of the burden will fall on suppliers. Hence, the share of a buyer’s tax burden is inversely related to the buyer’s demand elasticity. In other words, the greater the responsiveness of a buyer to the price of a product, the lesser will be the buyer's share of the tax burden—all else equal, of course.

The lower graph in the figure below reflects a greater share of tax burden to consumers who are less responsive to price changes. However, we expect there to be plenty of available substitutes to sweet, fatty danishes; thus the lower graph may well represent a tax on a more inelastic product, like gasoline (for American consumers). Notice also the higher new price (P1) associated with the less elastic demand curve in the lower graph. Danes, by the way, prefer bicycles over automobiles.

Greater demand elasticity, all else equal, also has the effect of reducing the quantity supplied. This also makes intuitive sense, and this can be seen in both graphs. If the demand curve is steeper (less elastic), as shown in the lower graph, the new quantity (Q1) supplied will be greater than if the demand curve is less steep (more elastic).

As far as economic welfare losses are concerned, I think it's safe to say that while the consequences of a fat tax result in higher prices to consumers, and lower quantities sold by producers, the switch to other food substitutes will likely result in lower prices and higher quantities sold of healthier alternatives, for a positive net gain to the health of society in general.

There’s an interesting opinion in the NY Times that describes the Danish rationale for taxing unhealthy products. When something is bad for its citizens, but not quite bad enough that it can be outlawed, it is TAXED! I can think of plenty of American products that would fall into this category. In Denmark the fat tax generates revenue to cover the some of the rising costs of universal healthcare. In the United States it seems excise taxes rarely garner much support unless the revenue generated is used to offset a reduction in another, more loathed, form of tax like the income tax. It’s a matter of social priorities, I suppose.